This is a best prospect industry sector for this country. Includes a market overview and trade data.
Based on analysis by Statista, the personal care and cosmetics products market in China is valued at $42.8 billion and is forecasted to become the world’s largest market within the next five years. U.S. Commerce Department data shows that in 2019 the U.S. exported personal care and cosmetic products to China valued at $820 million, up 28% from the previous year and 66% from 2017.
U.S. cosmetics and toiletries exports to China reached their highest level in four years, indicating ample opportunity for U.S. firms in the Chinese beauty market. According to China Briefing Magazine, this strong growth forecast is driven by China’s growing middle class, estimated to reach 400 million by the end of 2020, and rising consumer disposable income.
American premium and natural skincare and make-up products are especially popular among Chinese consumers, with Commerce Department statistics reporting that U.S. exports of these categories have increased by 37% since 2016. Other in-demand categories include specialty products in emerging market segments, such as personal care products for children, and grooming and make-up products for men.
Between 2011 to 2018, the cosmetics industry in China experienced steady growth, expanding by over 60%.
Source: Daxue Consulting
Online retail is by far the fastest-growing channel for cosmetics sales in China. The increasing popularity of online channels reflects both limited access to retail stores and a lack of brand diversity in China’s Tier 2 and 3 cities. This surge in online sales is driven by the significant advantages of selling through cross-border channels, as opposed to using traditional brick and mortar channels.
Cross-border products are not subject to the same registration requirements as products sold through traditional brick and mortar channels if shipped to individual consumers. This method of sale also saves significant time and costs for U.S. companies and gives firms the opportunity to avoid China’s animal testing requirement. However, the animal testing requirement may be eliminated as early as January 2021, when China implements its new cosmetics regulation guidance.
Chin’s e-commerce platforms are increasingly influential in impacting consumer purchases by providing a platform for the beauty community to share shopping and product experiences. For example, according to a Daxue Consulting study, the commerce platform Xiao Hong Shue (Little Red Book) has attracted over 200 million users who are predominantly female, with 70% of all registered users born after 1995.
Chinese consumers spend a significant amount of time online reviewing products and often base their purchasing decisions on recommendations from family and friends. The 2018 cosmetics and toiletries market in China was dominated by skin products at 55%, followed by hair products at 19%, cosmetics at 15%, and fragrances at 6%.
Source: Daxue Consulting
Challenges and Barriers
China’s regulatory environment can be challenging for foreign companies to navigate, with many barriers to entry. All cosmetics products sold through traditional channels must be approved by the National Medical Products Administration (NMPA). Even if the product has already been tested overseas, it still must be tested in one of China’s NMPA-designated testing facilities.
China currently requires a registration process with animal testing and a hygiene permit before imported cosmetics can enter the market. Obtaining the hygiene permit requires a Chinese legal entity, or for overseas cosmetics manufacturers without representation in China, assistance from a Chinese agency. The importer is required to sign a “Letter of Authorization,” confirming that it authorizes a Chinese company to be the registered responsible party in mainland China for its products. More information on China’s revised Cosmetic Supervision and Regulation can be found here.
U.S. companies should carefully follow all market entry procedures, product registration requirements, and specific labeling guidelines to enter and do business in China successfully.
November 2021, Hong Kong